Impermanent Loss Calculator
Calculate Your Potential Loss
Impermanent loss happens when the price ratio of your deposited tokens changes. Use this calculator to see how much value you could lose compared to holding the tokens.
Results
Enter values to see your potential impermanent loss.
Important: Impermanent loss is not a permanent loss. If prices return to initial values, you recover all value. Always use stablecoin pairs (like USDC/DAI) to minimize risk.
Imagine your crypto sitting idle in your wallet, doing nothing-while others earn free tokens just by leaving theirs in a pool. That’s the power of liquidity mining. It’s not magic. It’s not a scam. It’s a system built into decentralized finance (DeFi) that pays you for helping markets work better. And since 2020, it’s changed how everyday people earn from crypto without trading, staking, or even clicking a button every day.
Why Liquidity Matters in DeFi
Traditional banks have billions in reserves. Stock exchanges have market makers who keep prices stable. But DeFi? It started with nothing. No central fund. No big institutions backing it up. So how did platforms like Uniswap and PancakeSwap get enough trading volume to actually work? They turned to users-people like you-and paid them to lend their crypto. Liquidity mining solves a real problem: without enough money in the pool, trades get messy. Buy $1,000 worth of a new token, and the price shoots up because there’s not enough supply. Sell it, and the price crashes. That’s slippage. And it scares off traders. Liquidity mining fixes that by rewarding people who deposit equal amounts of two tokens-say, ETH and USDC-into a pool. In return, they get LP tokens, which represent their share of that pool.Earn Passive Income Without Trading
You don’t need to predict price movements. You don’t need to time the market. You just lock your tokens in a pool, and over time, you earn two things: trading fees and new tokens. Every time someone swaps ETH for USDC in that pool, a small fee (usually 0.05% to 0.3%) is taken. That fee gets split among all liquidity providers. So if you own 1% of the pool, you get 1% of every fee generated. Simple. On top of that, the protocol often gives out its own governance token-like UNI from Uniswap or SUSHI from SushiSwap. These tokens aren’t just cash. They give you a say in how the platform evolves. Want to change the fee structure? Vote on it. Want to add a new token pair? Propose it. Liquidity mining turns users into stakeholders.Lower Barriers to Entry
Before liquidity mining, only big hedge funds and market-making firms could provide meaningful liquidity. They had teams, algorithms, and millions to deploy. Now? You can start with $50. Or $200. Or even $5,000. There’s no minimum. No application. No background check. This levels the playing field. A student in Lagos can earn the same rewards as a trader in London. A retiree in Bristol can earn tokens just by leaving their stablecoins in a pool. That’s the democratization of finance-and it’s real.Better Prices for Everyone
More liquidity means tighter spreads. Tighter spreads mean fairer prices. When a pool has deep liquidity, a $10,000 trade barely moves the price. That’s good for traders. It’s good for new projects trying to build a user base. And it’s good for you, because it makes the whole system more stable. Think of it like a highway. More cars on the road? Traffic jams. But more lanes? Smoother flow. Liquidity mining adds lanes to DeFi highways. The more people who provide liquidity, the less likely you are to get ripped off by price swings when you want to buy or sell.
Marketing Power for New Projects
A new DeFi protocol with no users is just code. But add a liquidity mining program? Suddenly, people show up. Not because of ads. Because of free tokens. In 2020, Uniswap’s UNI airdrop sent its TVL (total value locked) from $1 billion to over $10 billion in weeks. That wasn’t marketing spend. That was incentive design. People weren’t just earning rewards-they were betting on the future of the platform. And that hype spread fast on Twitter, Reddit, and Telegram. New tokens get visibility. New projects get traction. And you, as a participant, become part of that growth story.Reduced Risk Compared to Other Crypto Activities
Mining Bitcoin? You need ASICs, electricity bills, and noise. Staking? You risk slashing if the node goes offline. Trading? You’re gambling on price swings. Liquidity mining? Your biggest risk is impermanent loss. That’s when the price of one token in your pair moves sharply compared to the other. If you deposit ETH and USDC, and ETH doubles while USDC stays flat, you’ll end up with less ETH than you started with-because the pool rebalances to keep the product constant (x*y=k). But here’s the catch: impermanent loss isn’t permanent. If the prices return to where they started, you get it back. And if the rewards you earn over time outweigh the loss? You still come out ahead. Many experienced providers use stablecoin pairs (like USDC/DAI) to avoid this entirely. Plus, you can hedge. If you’re worried about a token dropping, you can short it on a derivatives platform. Or you can withdraw your liquidity before a big price move. You’re not locked in.Two Income Streams, One Action
This is the real kicker: you get paid twice. First, you earn a cut of every trade that happens in your pool. That’s ongoing. That’s predictable. Second, you earn governance tokens. Those can be sold, staked for more yield, or held for voting rights. Some tokens have appreciated 10x, 50x, even 100x after launch. You’re not just earning from trading fees-you’re getting early access to the next big crypto project. It’s like being an angel investor, but without the paperwork or the risk of losing your entire investment.
What You Need to Know Before Starting
Liquidity mining isn’t risk-free. But it’s not rocket science either. Here’s what you need to do:- Choose a reputable platform: Uniswap, SushiSwap, PancakeSwap, or Curve are well-tested.
- Start with stablecoin pairs: USDC/DAI or ETH/USDC are safer for beginners.
- Check the APY, but also check the token emissions: a 100% APY might be unsustainable.
- Understand impermanent loss: use calculators on DeFiLlama or Zapper to estimate potential losses.
- Don’t invest more than you’re comfortable losing.
What’s Next for Liquidity Mining?
The early days of high-yield, low-risk mining are over. In 2025, rewards are lower, but more sustainable. Platforms are moving toward multi-chain liquidity mining-where you can earn on Ethereum, Arbitrum, and Solana all at once. Some even offer rewards in real-world assets like tokenized bonds or gold-backed tokens. Institutional players are starting to join. Hedge funds are using automated bots to farm liquidity across dozens of pools. But that doesn’t mean there’s no room for individuals. The system still needs small providers to keep pools balanced. And the rewards? They’re still better than most savings accounts.Final Thought: It’s Not About Getting Rich Quick
Liquidity mining isn’t a get-rich-quick scheme. It’s a way to make your crypto work harder. If you’re holding tokens you don’t plan to sell soon, why not let them earn you something? Even 5% to 15% a year adds up over time. It’s passive income with skin in the game. You’re not just consuming crypto-you’re helping build it. And that’s worth more than the tokens you earn.Is liquidity mining safe?
Liquidity mining is safer than trading or gambling on memecoins, but it’s not risk-free. The main risk is impermanent loss, which happens when the price of one token in your pair changes sharply. You can reduce this risk by using stablecoin pairs like USDC/DAI. Also, always use well-audited platforms like Uniswap or SushiSwap. Never deposit funds into a new, unverified pool with no track record.
Can you lose money with liquidity mining?
Yes, but usually only if you don’t understand the risks. If the price of one token in your pair drops significantly and you withdraw before it recovers, you could lose value compared to just holding the tokens. However, if the rewards you earn (trading fees + governance tokens) over time exceed that loss, you still come out ahead. Many users break even or profit within a few months.
How do I start liquidity mining?
First, get a crypto wallet like MetaMask. Then, buy two tokens you want to pair-like ETH and USDC. Go to a DeFi platform like Uniswap, click "Add Liquidity," select your pair, enter the amount, and confirm the transaction. You’ll receive LP tokens. Then, go to the "Farms" or "Earn" section and stake those LP tokens to start earning rewards. Always check the APY and token emissions before depositing.
What’s the difference between liquidity mining and staking?
Staking means locking up a single token to support a blockchain’s security (like staking ETH on Ethereum 2.0). You earn rewards for helping validate transactions. Liquidity mining means depositing two tokens into a trading pool to enable swaps. You earn trading fees and often governance tokens. Staking is simpler. Liquidity mining offers higher potential returns but comes with more risk, like impermanent loss.
Are liquidity mining rewards taxable?
In most countries, including the UK, rewards from liquidity mining are treated as income. When you receive new tokens, you owe tax based on their fair market value at the time you receive them. When you later sell those tokens, you may owe capital gains tax. Always keep records of your deposits, withdrawals, and token values. Use crypto tax tools like Koinly or CryptoTaxCalculator to stay compliant.
Which platforms are best for beginners?
For beginners, stick with established platforms: Uniswap (Ethereum), PancakeSwap (BSC), or SushiSwap (multi-chain). These have been audited, have large user bases, and simple interfaces. Avoid new or obscure protocols offering extremely high APYs-they’re often scams or unsustainable. Start with stablecoin pairs like USDC/DAI to minimize risk.
Can I withdraw my liquidity anytime?
Yes. You can remove your liquidity at any time. But if you do it during a big price swing, you may experience impermanent loss. Some platforms also have lock-up periods for bonus rewards-always check the terms before depositing. If you’re unsure, start small and test the process before committing larger amounts.
Do I need to claim rewards manually?
Some platforms auto-compound rewards, meaning your earnings are automatically reinvested. Others require you to manually claim your tokens. Check the platform’s interface-most will have a "Claim" button. Don’t forget to claim regularly. Unclaimed rewards don’t compound, and you could miss out on earnings.
What happens if a liquidity mining program ends?
When a program ends, you still own your LP tokens and your original deposited assets. You can withdraw them anytime. The only thing you lose is the extra token rewards. The trading fees may continue if the pool remains active. Many users keep providing liquidity even after rewards stop because the trading volume still generates income.
Is liquidity mining still worth it in 2025?
Yes-if you’re realistic. The days of 100%+ APYs are gone. But many pools still offer 5% to 15% in stablecoin rewards, plus governance tokens that can be valuable. It’s no longer a gold rush, but it’s still one of the best ways to earn passive income from crypto without selling your assets. The key is choosing sustainable pools and managing risk.
alex piner
November 15, 2025 AT 11:07yo i just started with 50 bucks in USDC/DAI on uniswap and honestly? my wallet’s been chilling like it’s on vacation. fees keep piling up and i haven’t even touched my tokens. this is the closest thing to free money i’ve ever seen in crypto.
Rachel Anderson
November 15, 2025 AT 14:33Oh sweetie. You think this is ‘free money’? You’re not even accounting for impermanent loss, the gas fees that eat your profits, or the fact that 90% of these pools are rug pulls in disguise. If you don’t know what a constant product market maker is, you shouldn’t be touching liquidity mining. You’re just feeding the machine.
Liz Watson
November 16, 2025 AT 20:06Wow. So you’re telling me the ‘democratization of finance’ is just a fancy way to say ‘give your crypto to strangers and hope they don’t rug you’? I’ve seen more ethical schemes on a middle school bake sale.
Gavin Jones
November 17, 2025 AT 05:00Actually, i think rachel has a point - but not because it’s risky. it’s because most people don’t realize how much work goes into managing liquidity properly. i’ve been doing this since 2021. you gotta monitor pools, time withdrawals, track emissions. it’s not passive. it’s more like a part-time job with crypto.
Byron Kelleher
November 18, 2025 AT 19:50gavin’s right - it’s not magic, but it’s not evil either. i started with 200 bucks in eth/usdc. after 3 months, i earned 12% in fees + 0.8 sushis. sold half, reinvested the rest. now i’m up 40% total. no stress, no trading. just chillin’.
Hannah Kleyn
November 19, 2025 AT 21:12impermanent loss sounds scary but honestly if you’re using stable pairs and holding for months it’s barely a blip. i lost 3% on a usdc/dai pool last year and made 18% in rewards. math wins. also why is everyone so scared of math in crypto?
Becky Shea Cafouros
November 21, 2025 AT 10:36you all sound like you’re trying to sell me a timeshare in the metaverse. liquidity mining? sounds like a glorified savings account with extra steps and a 50% chance of getting rekt.
David Cameron
November 23, 2025 AT 01:30the real question isn’t whether it’s profitable - it’s whether you’re comfortable being a market participant rather than a spectator. you’re not just earning. you’re enabling price discovery. that’s not passive. it’s civic duty in a decentralized world.
Andrew Parker
November 25, 2025 AT 00:38but what if… the system is designed to make you feel like you’re winning… while quietly extracting your data, your capital, and your trust? who controls the smart contracts? who audits them? what if the devs just… vanish? i’m not scared of impermanent loss… i’m scared of human greed.
Katherine Wagner
November 25, 2025 AT 23:56you’re all missing the point. liquidity mining is just the new ponzi. remember when everyone thought bitcoin was a scam? now it’s a reserve asset. maybe this is the same cycle. or maybe it’s not. who knows. nobody knows. lol.
Cherbey Gift
November 27, 2025 AT 12:02in nigeria we call this ‘make money while you sleep’ - and i love it. my auntie in abuja deposited 100k naira into pancakeswap and now she buys yams with sushi tokens. i told her it’s risky - she said ‘baby, if the world ends, at least i ate well.’
Kandice Dondona
November 28, 2025 AT 09:52guys i just wanna say… YOU’RE ALL DOING AMAZING 😍✨ even if you lose a little, you’re learning, you’re participating, you’re part of something bigger than华尔街. keep going! 💪🚀
anthony silva
November 28, 2025 AT 20:49so you’re telling me i should risk my crypto so some dev in singapore can fund his lambo? cool. i’ll stick to holding btc and pretending i’m a billionaire.
Kelly McSwiggan
November 28, 2025 AT 22:00the apy is a lie. the token emissions are unsustainable. the tvl is inflated by bots. the audit is a pdf from a guy named ‘crypto_god_420’ on github. this isn’t finance. it’s a casino with a whitepaper.
Robert Astel
November 30, 2025 AT 09:22you know what’s really wild? the fact that we’re all here debating whether this is ethical or profitable, but none of us are asking who built the system in the first place. who decided that liquidity should be incentivized? who owns the governance tokens? and why are we all so eager to be the ones who give our money away to strangers… while hoping they’ll give us a shiny new token in return? it’s like we’re all playing a game of musical chairs… and the music is written in solidity.
Sara Lindsey
November 30, 2025 AT 12:01i started with 100 usdc and now i’ve got 150 in rewards. i didn’t even think about it. just left it. i’m not smart enough to trade. this is the only thing that made me feel like crypto wasn’t just gambling. also i got a free nft once. it’s a cat. i named it ‘profit’.
gary buena
December 2, 2025 AT 02:20impermanent loss is real but so is the fact that i made more from liquidity mining in 6 months than i did from my 9-5 in 3 years. i’m not rich. but i’m not broke either. and i didn’t have to sell my eth. that’s the win.
ratheesh chandran
December 3, 2025 AT 02:04in india we say ‘jugaad’ - smart hack. this is jugaad. you put your coins in, you get free coins out. if the price goes down? you wait. if it goes up? you sell. if the pool dies? you move. simple. no need for fancy words. just do it.
sandeep honey
December 3, 2025 AT 12:38what about tax? i heard in usa you pay tax on every token you receive even if you don’t sell. is that true? i’m not rich but i don’t want irs knocking on my door.
Mauricio Picirillo
December 4, 2025 AT 03:33if you’re new, start small. usdc/dai. uniswap. 100 bucks. leave it for 30 days. check your rewards. if you’re still confused, ask. if you’re still scared, wait. if you’re still curious - try it. you’ve got nothing to lose but your hesitation.
Anthony Forsythe
December 5, 2025 AT 01:53we’ve turned finance into a video game. every pool is a level. every token a power-up. every impermanent loss a respawn. we’re not investing. we’re leveling up. and the real question isn’t ‘is this safe?’ - it’s ‘what kind of player are you?’
Drew Monrad
December 5, 2025 AT 06:21if you think this is ‘democratized finance’ then you’ve never met a hedge fund with a bot farm harvesting 120 pools at once. the little guy is just the bait. the real players are the ones who front-run your deposits. you’re not building the future. you’re fueling it.
Mandy Hunt
December 6, 2025 AT 14:12they’re watching you. every deposit. every claim. every withdrawal. they know your wallet. they know your habits. they’re building a profile. soon they’ll sell it to advertisers. or worse - to the government. this isn’t freedom. it’s surveillance with a yield.
Cody Leach
December 7, 2025 AT 08:37the only thing i’ve learned is that if you don’t understand the contract, don’t deposit. if you don’t know how to withdraw, don’t start. if you’re not sure, wait. crypto doesn’t care if you’re ready. but your wallet does.
Kevin Hayes
December 8, 2025 AT 15:05liquidity mining isn’t about returns. it’s about participation. in a world where finance is increasingly centralized, this is one of the last places where an individual with 50 dollars can have the same leverage as a fund with 50 million. that’s not just economics. that’s philosophy.